49ers stadium: State again rejects $30 million deal between team, South Bay schools

Courtesy HNTB Architecture -- The Forty-niners made a presentation to the Santa Clara City Council Tuesday night which included new, more detailed renderings of the new stadium to be built in Santa Clara to house the Forty-niners home games. This is the view looking to the southeast.

SACRAMENTO -- The Brown administration has once again denied a $30 million settlement between the San Francisco 49ers and South Bay schools, setting up a courtroom showdown over the coveted taxpayer funds.

The California Department of Finance late Tuesday rejected an appeal from the Niners and local officials, ruling they had violated new state redevelopment laws in agreeing to split the money between the team's Santa Clara stadium and the classroom. It echoes the state's preliminary ruling in October, which reached the same conclusion.

The battle now must be resolved in court. The 49ers, state, city, county and other local governments trying to get their hands on the $30.2 million are locked in a complicated lawsuit while the money is frozen under court order.

A Sacramento Superior Court judge could declare the true owner of the funds as soon as March 22. In preparation, attorneys for the 49ers, state attorneys general and lawyers for local leaders have filed competing and equally fierce legal arguments in the last two weeks and will continue doing so for the next two months.

The skirmish has not disrupted ongoing construction of the $1.2 billion stadium, which is on schedule to open for the 2014 NFL season.

Tuesday's ruling, while expected, follows months of twists and turns.

City of Santa Clara voters had voted to earmark the redevelopment tax funds for the stadium in 2010. But after the state eliminated redevelopment agencies earlier this year, a newly empowered county oversight board tried yanking the funds away from the stadium to spend on local schools.

After a public debate and court battle waged on, the sides agreed to a compromise in August, with the 49ers delaying their full share of the funds for a few years while giving the schools about half the money they were seeking. But the state Finance Department rejected the settlement on Oct. 15, saying it was reached a year after redevelopment agencies were scrapped and, thus, was void.

Local officials pleaded their case during an appeal on Nov. 26. They argued that the original deal that outlined the stadium contract was reached in 2010, well before the state began talking about scrapping redevelopment agencies.

However, in an four-page ruling sent to Santa Clara City Hall on Tuesday night, which also covered other Santa Clara redevelopment projects, state finance officials said the latest settlement is voided because it is a "new agreement" reached just months ago.

"I'm obviously disappointed in the outcome but not surprised that they agreed with themselves," Mayor Jamie Matthews said, noting the state had a financial interest in denying the tax funds for the stadium. "The process is not set up to be objective or fair to the cities."

The 49ers declined comment.

Meanwhile, in a related development, county officials this week said in a separate report that the city of Santa Clara owes the state a total of about $302 million after "illegally" trying to keep redevelopment assets.

"My initial reaction was, 'I told you so!'" said Deborah Bress, a spokeswoman for Santa Clara Plays Fair, which opposes the stadium and city government. "What they did was irresponsible from the beginning. Now it's coming back to bite them."

In a report to the state, Santa Clara County Finance Director Vinod Sharma and a private auditor said city officials improperly transferred all assets from their redevelopment agency, which included cash, property and investments, to other city departments or funds.

The amount in question is about double Santa Clara's annual budget. Sharma's report does not compel the city to pay the $302 million. That decision belongs to state Controller John Chiang, who has recently ruled that Milpitas and Morgan Hill also illegally transferred redevelopment assets.